Canada — Trump’s China Pawn

The American request for the arrest

It was a year ago this month when the Trudeau government detained and arrested Huawei Technologies Chief Financial Officer, Sabrina Meng Wanzhou, in Vancouver at the sole request of the United States. Meng is the daughter of Ren Zhengfei, the founder of and CEO of Shenzhen-based Huawei, the world's largest manufacturer of telecommunications equipment and second largest manufacturer of smartphones. There are now 500 million Huawei phones in active use across more than 170 countries. The company sold over 200 million phones worldwide in 2018 alone and is on track to become the world's largest phone vendor by the end of 2019. 

Meng is as important a figure to the Chinese as Bill Gates is to the Americans or Jim Balsillie is to Canadians. Her detention has greatly angered the Chinese government who believe it is an abuse of extradition laws, unjust, improper and politically motivated. They continue to demand her immediate release and the ongoing debacle has placed Canada-China relations at their lowest point in six decades. 

China’s claim that the arrest was politically motivated is credible given that it took almost two months, after Meng’s arrest in Vancouver, for the U.S. Department of Justice to come up with and then lay 13 criminal charges, including conspiracy, fraud and obstruction, against both Huawei and Meng. Despite no charges being submitted when she was detained, within days of her arrest, U.S. President Donald Trump mused in a media scrum that, “Meng might be let go, if it is in America’s interests to do so”.

Trump’s comments reinforced the view that Canada had succumbed to American pressure and that it went along with the arrest to appease the United States in the hope that it might help the Trudeau government in their negotiations with the Americans in the North American Free Trade Agreement (NAFTA) talks. The Americans bullied Canada into renegotiating NAFTA to favour America with threats and actions on multiple fronts, including the imposition of a unilateral 25 per cent tariff imposed on Canadian steel exports to the U.S., in 2018.

Meng’s arrest by Canada was perceived as a deep betrayal of trust in the decade’s long relationship between the two countries. For the Chinese government, her detention was akin to a kidnapping by a foreign government of one of their most revered business executives, at the behest of a U.S. government who had very publicly declared a trade war against China. In short, Canada had willingly played the role of the pawn in the abduction of Meng, on behalf of the United States.

China detains Michael Kovrig and Michael Spavor

Within days of her detention, China retaliated, arresting two Canadians, Michael Kovrig and Michael Spavor, on allegations of endangering China’s national security. The reaction of the Canadian government to the arrests was derisory, causing further damage. Prime Minister Trudeau and Global Affairs Minister Chrystia Freeland publicly lectured the Chinese government about how Canada, is a ‘rule of law’ nation that is obligated to comply with extradition requests from the Americans. This of course is poppycock. 

Canada is a sovereign nation that has extradition agreements with the Americans and many other countries. Requests are adjudicated on a case-by-case basis by officials at the Department of Justice Canada, and in this situation, in cooperation with Global Affairs Canada and the Privy Council Office (PCO). The particular extradition treaty used by the Americans in the Meng case is more commonly used to capture criminal drug lords, money launderers and murderers seeking to escape U.S. prosecution and has never been used for an arrest involving a commercial dispute.

Meng is not accused of any crime in Canada. She has never been charged or arrested or accused of anything criminal, anywhere else. More importantly, under the specific extradition treaty being used by the Americans, even if the court decides Meng should be extradited (or released) the final decision on her situation rests with the Attorney General of Canada and is his alone to make. So, it is political.

When former Chinese Ambassador to Canada Lu Shaye published an op-ed last January regarding the Meng case that suggested Canada was being racist towards China with its ‘western egotism and white supremacy’. A tsunami of outrage followed from the government and from mainstream Canadian media.

Sadly, few were listening to the legitimate point Lu was making, which was that Canada was being condescending towards China by suggesting that the Canadian and Western system is superior to theirs, and by extension westerner values are superior to the Chinese values and way of life. 

From the Chinese point of view it makes sense, especially given the fact that Ambassador Lu Shaye had given several interviews while in Canada, including with Ottawa Life Magazine where he would often say: ‘China is China and China does not want to be the west.’  

Instead of thoughtful reflection, the response from the government and most of Canada’s national media was to ramp up the outrage and say, ‘!@#$% the Chinese government — we’ll show them’.

Trudeau and Freeland responded to the Chinese remarks by inferring that China is an inferior and deficient country for not having the same ‘rule of law’ governance as Canada and other western countries, and that our system and values are superior. It was an incredibly arrogant and stupid tact to take with the Chinese who are very sensitive about such matters.  

Sadly, Trudeau failed to see the absurdity and irony in his comments which were made at the very time when he and his aides were caught red-handed breaking the law in Canada by interfering in the independent criminal prosecution of SNC Lavalin. Trudeau was found guilty of ethics violations by the Canadian Ethics Commissioner in the spring. However, he continued with his holier-than-thou and pompous lectures to China on morality and ‘rule of law’ issues which only served to highlight the hypocrisy of the Canadian government and made a bad situation with China worse.

Freeland put more salt in the wound by seeking international support to condemn China’s decision to “arbitrarily” arrest Kovrig and Spavor. How that strategy or Trudeau’s inanity would lead to the release of Kovrig and Spavor left many dumbfounded. After all, the detainment of the two Canadians was a direct consequence of their approval of the Meng extradition which led to the entire mess in the first place.  

The Chinese have their own system of justice with their own rule of law. It is not our system, nor our rule of law, so the premise being put forward by many in the Canada that China must treat people in their criminal system under that same rules as in our ours, is frankly obtuse.

You would expect that people at Global Affairs would also get this since they are in, ‘global affairs’. Simply put, China is not bound by the same laws or principles as western nations. It is a a Marxist socialist and communist country governed by a different set of laws and rules that works for its 1.3 billion people. 

Doubling down on stupid

By the spring of 2019, former Conservative Prime Minister Brian Mulroney and former Liberal Prime Minister Jean Chretien had both publicly urged the Trudeau government to engage the Chinese government over the affair and both offered to help to get Spavor and Korvig released. That Mulroney and Chretien were signaling in the media that the Trudeau government should get directly engaged with the Chinese on the matter is telling. It was another sign of the ineptitude of officials at Global Affairs, the Department of Justice and within the PMO who were still leading Canada’s China policy, post the Meng arrest.

Despite the help offered by the former PMs, Trudeau continued to ratchet up the rhetoric. China responded by halting the sale of over $2.9 billion worth of Canadian canola, blocked Canadian meat imports and tightened up the screening of many other imports. The canola and beef sectors and their workers in Canada were adversely affected.

The Trudeau government was significantly weakened in the fall federal election as their large majority government shrank to minority status.

A beginning of the end or the end of the beginning  

In what some perceived as the beginning of an attempt to change the channel on China, Trudeau named a business savvy Quebec MP, Francois-Philippe Champagne, as Canada's new foreign affairs minister and Domenic Barton, a respected Canadian businessman with lots of China experience, as Canada’s new Ambassador in Beijing. An olive branch emerged shortly thereafter when the Chinese accepted a Canadian proposal to re-open their market to Canadian beef imports. The new Chinese Ambassador to Canada, Cong Peiwu, then signalled in a November interview with Ottawa Life Magazine that canola sales could possibly resume if health and food safety certificate issues were resolved, but he would not give a timeline as to when that might happen. However, Ambassador Cong made it clear in the interview that for the relationship to improve and get back to what it was, Meng must be released. Ambassador Cong said:

“Overall, in almost 50 years of diplomatic relations between Canada and China, at least two important things have remained constant despite the ups and downs. The first is a healthy and stable bi-lateral relationship is in the mutual interest of both our two countries and peoples. The second is the principle of mutual respect and equality. This is the golden rule to ensure the relationship can move forward along the right track. China is following this rule and we hope Canada will take steps to do the same so we can move back to the normal track.

The Meng Wanzhou issue is a very serious political incident and the Canadian side abused a treaty regarding Meng and detained her. It is up to the Canadian side to release Madame Meng Wanzhou at once. The solution is very clear. We have urged the Canadian side on many occasions to take steps to free Meng and make sure she is traveling back to China safely. Only by doing so can we talk about moving the relationship back to the normal track”.

There is not doubt that Canadians are angry and upset about the detentions of Korvig and Spavor. A November 2019 University of British Columbia poll found that only 29 per cent of Canadians now view China favorably, a steep decline from just over a year ago. However, what Canadians are not seeing is that for the Chinese, the arrest of Meng is just as much of  an outrage to them as the Korvig and Spavor detentions are to Canadians.  

President disruptor is the real reason for all of this

The American allegations against Meng, to justify her extradition claim from Canada to the U.S., are based on an unproven accusation that Huawei and Meng violated American sanctions against Iran. The Canadian government and the American government do not address the issue that President Trump unilaterally pulled the U.S. out of an international treaty without anyone’s consent, including the American partner countries who signed it.

In his ongoing trade war with China, President Trump targeted Huawei and placed the company on the Entity List. As a result, if a U.S. company wants to sell something to Huawei, it needs to obtain approval from the U.S. government. As a commercial company and the world’s most successful telecom enterprise, being temporarily banned in the U.S. from supplying to federal agencies under the country’s National Defence Authorisation Act (NDAA) without any evidence being presented is very unnerving. Trump officials accuse the company of stealing technology and facilitating Chinese spying. Huawei denies those accusations. Despite these claims, the U.S. government have been unable to provide evidence to show that Huawei poses a cybersecurity threat. In response, Huawei Technologies has filed a massive lawsuit against the U.S. government in a bid to overturn the U.S. federal ban on its gear, arguing that the federal ban is unconstitutional, as it singles out a person or a group for punishment without trial. Huawei claims the ban is not only unlawful but also harms both Huawei and U.S. consumers.

The U.S. government has continued to slander the company contending without any evidence that back doors could be built into Huawei gear that could facilitate Chinese intelligence efforts, a claim that the company vehemently denies.

Huawei rotating Chairman, Guo Ping, told a Shenzhen press conference last month that, “Huawei has not and will never implant backdoors.” Adding that, “We will never allow others to install any in our equipment.” Installing backdoors or collecting intelligence would be equivalent to “committing [commercial] suicide.” Song Liuping, Huawei’s chief legal officer said that, the U.S. government's attack on the company is “purposeful and punitive,” noting that the statute not only prevents Huawei from doing business with federal agencies but also private enterprises that contract with the agencies, even if the projects are private and unrelated to government projects.

Huawei says that the restrictions placed on its equipment violate at least three constitutional provisions, including the “bill of attainder clause” (Section 889). The constitution forbids Congress to pass such bills. “Section 889 . . . [singles out] Huawei by name, blacklisting it, damaging its reputation, and denying it any way to clear its name and escape sanction,” said Song. Additionally, the company argues that the ban on its equipment breaches the “due process clause”, which prohibits the government from depriving a person of life, liberty or property without due process of law. Huawei also said that the ban infringes on the “separation-of-powers” principle in the U.S. Constitution, as the U.S. Congress is both making the law, as well as adjudicating and executing it. “Huawei has never had a fair chance to confront or cross-examine its accusers, nor has it been allowed an impartial adjudicator,” said Song.

Besides being targeted with over two dozen unproven and unsubstantiated charges from the United States, ranging from financial fraud to violating trade sanctions, the U.S. has also pressured its allies in the Five Eyes alliance and in Europe to isolate Huawei from their upcoming 5G mobile networks, which promise to deliver data speeds up to 100 times faster than existing 4G systems, warning that companies who choose to use Huawei equipment could face challenges working with the U.S. in future. British intelligence has concluded that it was able to mitigate the risks from using Huawei gear in upcoming 5G networks, and Germany’s interior ministry has said that it had no plans to directly exclude particular 5G equipment suppliers. France will allow the 5G system, while Canada is still deciding.

What is Huawei’s 5G network

In terms of network capacity, 5G is 20 times larger than 4G and 10,000 times larger than 2G. The power consumption of a Huawei 5G base station is ten times lower than 4G, and the size is 70 per cent smaller. A 5G base station is light, about 20 kilograms, the same size as a briefcase. You don't have to build a cell phone tower for 5G base stations, because they can be installed anywhere: on poles, even on walls. They will last for decades because they are made of anti-corrosion and lightweight composite materials. 5G equipment can be installed even in places like underground sewage systems. They are especially suitable for European markets where there are many areas with historical buildings and it's impossible to build giant new cell phone towers. 5G base stations allow customers to reduce their engineering costs by $11,000 U.S. or 10,000 euros per site. Cities in Europe and the Middle East are lining up for installments. Another 5G bandwidth breakthrough: it can support a huge amount of high-definition content and easily transmit 8K video. Estimates are that the 5G platform will reduce costs by tenfold or more. The latency on 5G networks is extremely low, so it can be rapidly adopted and integrated into numerous existing industries for multiple purposes.

With so much at stake, the Huawei-U.S. lawsuit is sending a message to Huawei’s customers and countries, that it is willing to fight back against reputational damage being foisted upon it by the Americans.

The American announcement of export curbs against Huawei initially prompted warnings that sales of Huawei smartphones and other products that use U.S. chips and other technology could be devastated, resulting in a loss of billions of dollars in potential annual sales for American vendors. However, the reverse happened and Huawei sales in the first six months of 2019 were up 23.2 per cent over a year earlier. Huawei ended up selling more than 200 million phones in 2018 alone and over 100 countries around the world have either signed up or are looking to participate in Huawei’s G5 network rollout.

Huawei has taken further counter measures and has been developing its own chips, software and other technology that reduce its reliance on American vendors. The company spent U.S. $15 billion last year on research and development, more than Apple or Microsoft. The company is now focused on ensuring its core products can be delivered to all customers without American components.

Huawei founder Ren Zhengfei noted the irony of all this, telling press last month that, “At a strategic level, the U.S. Entity List is helpful to Huawei”. He said the company has responded by eliminating “marginal, unimportant businesses or products” and focusing resources on “major products”. “The whole company can focus more on our most competitive products,” he said.

Last month, Huawei unveiled its own smartphone operating system that can replace the popular Android system from Google. Huawei's phones still use Android, but Google is blocking them from supporting maps, music and other services. Earlier this year, Huawei released its own chip for next-generation smartphones and the first phone based on that chip.

Ren says he is a fan of the United States and has publicly praised Trump as a leader.

“What the U.S. will do is out of our control. I would like to take this opportunity to express my gratitude to the U.S. companies that we work with. Over these 30 years, they have helped us to grow into what we are today. They have made many contributions to us. As you know, most of the companies that provide consulting services to Huawei are based in the U.S., including dozens of companies like IBM and Accenture. Second, we also have been receiving support from many U.S. component and part manufacturers over all these years. In the face of the recent crisis, I can feel these companies' sense of justice and sympathy towards us”, says Ren.

He says Huawei would prefer to retain technology collaboration with Google, Microsoft and other American developers and believes that Huawei can help U.S. companies because Huawei’s products use American technology. “It wouldn’t be in the best interests of the United States”, Ren said. He said even if Huawei develops its own alternatives, it is willing to buy American components to support industry development. “We hope we can, and we will continue to be able to buy American components,” he said. “Even though we may have the ability to turn out our own components or products, we would choose to reduce our own capacity to use more American components in order to contribute together to share the prosperity of society.” Ren said Huawei was planning as if the U.S. export restrictions would remain in place. “It isn’t possible that someone in the United States will step up to revoke the Entity List designation,” he said. “Right now, attacking Huawei in the United States is politically correct, while helping Huawei even once would put them under significant pressure. So, to us, the Entity List will be there for quite some time.” (Ren Zhengfei — On the Record, Huawei Executives Speak to the Public 2019).

In Canada, Huawei has invested over $56 million into Canadian university research creating partnerships with over 22 Canadian universities in the past decade and added nearly $700 million to Canada’s economic output including $164 million in research and development in Canada in 2018 alone. This ranks Huawei among the top 25 corporate research and development spenders in Canada by Research Infosource Inc., a research, consulting and publishing company.

A recently released Oxford Economics study says Huawei’s activity in Canada supports more than 4,750 full-time jobs in Canada (including over 1,400 at a Huawei R & D centre in Kanata).  Huawei and its employees also paid $81 million in taxes, including personal income and corporate tax, and social security contributions. (Huawei has also received more than $100 million in research and development tax credits.)

Alykhan Velshi, vice-president of corporate affairs for Huawei Technologies Canada says that Huawei  is committed to continuing it operations in Canada should Ottawa block the Chinese company from mobile network infrastructure. “Our commitment to Canada is not a contingent proposition.” “We are happy to meet any test asked of us when it comes to guaranteeing the integrity and security of our 5G offering even as we continue to invest in and build upon our Canadian operations." Velshi says Huawei’s presence in Canada puts Canada at  the forefront of 5G technology. “Through its investments in Canadian universities, Huawei is helping to position Canada as a potential world leader in 5G technology,” he said.

Canada is a pawn  

In this context, the Meng arrest in Canada becomes much more nefarious. Canada becomes the pawn in a U.S.-China commercial and trade war where the Americans use our legal system as part of their goal to obtain a commercial benefit over Chinese companies competing against American companies in the global market. As a result, the American action could also cause significant  collateral damage to R&D programs and investments made by Huawei in Canada. This will be damaging to Canada’s economy and R&D programs which do not answer to the American government or U.S. business interests.

That Canadian government officials didn’t get any of this before they made absurd decision to detain Meng and send Canada into this unnecessary spiral this speaks to their core competency on multiple levels. Either way, the result is the Meng arrest made Canada the meat in the China-U.S. trade war sandwich and as a result our canola industry is in the toilet and we are facing multiple threats from a global superpower who does not want to fight with us unless we make them.

We started an unnecessary fight with China to appease the Americans. Last December, our government should have stood up to the Americans and given a firm NO to Trump and his disruptor’s request for Meng’s extradition. Instead, we caved and are now whining about the consequences as a result of our decision. It is time to change the channel and get back to the future.